Union Budget 2015: Overall positive for health care, but offers no direct benefits to pharma

The Union Budget by Finance Minister Arun Jaitley is being lauded for moving forward on Make-in-India by correcting the inverted duty structure. But this policy poses a huge challenge for the Indian pharmaceutical industry, which is dependent on cheap raw material imports from China.

"Correcting the inverted duty structure is a move in the right direction but its impact on the pharmaceutical industry will have to be seen," says D.G. Shah, Secretary General of the Indian Pharmaceutical Alliance (IPA), which has major Indian pharmaceutical companies as its members. "The government has also been wanting to encourage manufacturing of raw material - basic drug ingredients - in India under its API (active pharmaceutical ingredients) initiative but if raw material import duty goes down to that extent it will be a challenge to manufacture those raw materials in the domestic market."

Overall, the Budget offers no direct benefit to the pharmaceutical industry, though it is certainly positive for the health-care sector. Because of various initiatives, the net disposable income for the middle class goes up, which again could mean more money going into health care. "It's a good overarching Budget which is now destination-focused not merely directional," says Kiran Mazumdar-Shaw, Chairman and Managing Director, Biocon.

HITS AND MISSES

For pharmaceutical industry

1. Hits: Extension of health cover and through initiatives to boost health insurance; this will reduce out-of-pocket spending.
2. Misses: Little encouragement for investment into R&D. There is no direct funding/support for research and development/ innovation. Second, reduction in minimum alternate tax (MAT) benefit has not been extended for R&D.

For health care

1. Hits: Sangita Reddy, Joint Managing Director, Apollo Hospitals Enterprise, says that, while the percentage of budgetary allocation to health care has not increased, the Budget has enabled EPF funds to also go into health care. Also, insurance and universal health coverage has been stimulated in a unique and strategic manner, she says.
2. Misses: Not creating a health cess like the education cess is a big missed opportunity because lack of funding is a major issue in the health-care sector.